Glenview man charged in North Korean trading scheme

Tagged by U.S. authorities in 2009 for his role in a North Korean weapons procurement channel, Taiwanese businessman Hsien Tai Tsai "Alex" Tsai was banned from doing business in the United States.

But in a federal criminal complaint unsealed Monday in a Chicago courthouse, authorities alleged Tsai's son, Yueh-Hsun "Gary" Tsai, 36, who lives in Glenview, helped his father evade the ban by conspiring to continue shipping machinery that could be used to produce weapons of mass destruction. The elder Tsai was charged as well.

Neither man is accused of making direct shipments to North Korea. Instead, the complaint charges they attempted to hide Alex Tsai's involvement and that of his company, Trans Merits, by conducting business under other company names.

The international scheme unraveled after the FBI conducted an extensive search of emails exchanged among the father and son and several companies, some based here and some in Taiwan.

Alex Tsai was arrested Wednesday in Estonia and remained in custody there on Monday pending extradition. His son, 36, who was also arrested Wednesday, was ordered released Monday by a federal judge to home confinement on a $500,000 bond secured by his home and a $90,000 cashier's check. He must wear electronic monitors.

Federal authorities did not comment on why Alex Tsai was in Estonia, but U.S. authorities have used sting operations to lure targets into countries with friendly extradition policies, according to security experts.

Gary Tsai's attorney, Theodore Poulos, said his client came to the United States from Taiwan about a decade ago and attended a school he declined to identify. He has legal permanent status in the U.S. and is married.

Poulos, speaking to reporters after court, said his client was "helping his father" buy equipment that he said was commonly used in American industry. Poulos also stressed that prosecutors did not try to keep his client locked up. He also said the younger Tsai has no criminal history.

"The conduct alleged in the complaint is 21/2-years old," Poulos said. "There is no allegation in this complaint that Mr. Tsai was aware that any of this … equipment was destined or intended for North Korea."

The elder Tsai was sanctioned in 2009 by the U.S. Treasury Department, along with Trans Merits and another of his companies, after it was determined that he had been supplying "goods with weapons productions capabilities" to North Korea since the late 1990s, authorities said. This came about a year after Tsai was convicted in Taiwan for illegally forging invoices and shipping restricted materials to North Korea, according to the federal complaint.

Such "procurement agents" are a common tool for North Korea to outfit their weapons programs, according to Andrea Stricker, a senior policy analyst at the Institute for Science and International Security.

"The only way for them to continue expanding their advanced weapons programs is through these types of procurements," Stricker said Monday. "Stopping them is definitely important to international security."

Eight months later, father and son, along with others, purchased a "Bryant center hole grinder" from a suburban Chicago company and exported it to Taiwan using a phony name, according to the charges. Authorities said the machine grinds center holes with "precisely smooth sides through the length of a material."

The charges allege that Gary Tsai formed a machine tool company in September 2009 in Glenview that actively imported and exported machine tools and parts, authorities said. But his father and Trans Merits were partners in violation of the ban, the charges alleged.

A neighbor said Gary Tsai and his wife had lived in their Glenview home just a few years.

"Wouldn't you be surprised?" Jerry Inguagiato, who has lived in the community since 1974, said of the charges. "I hope the accusations are not true. They seemed like very nice people."